Costing Methods Quiz

What type of costs are included in the product cost under absorption costing?

• Variable manufacturing costs only

• Fixed manufacturing costs only

• Both variable and fixed manufacturing costs

• None of the above

Which costing method treats all manufacturing costs as product costs, regardless of whether they are fixed or variable?

• Absorption costing

• Variable costing

• Both absorption and variable costing

• Neither absorption nor variable costing

Under variable costing, how are fixed manufacturing overhead costs treated?

• Capitalized as part of inventory

• Expensed in the period incurred

• Amortized over multiple periods

• Not considered at all

Which of the following statements is true regarding the impact of absorption costing on financial statements?

• It can lead to underestimation of costs in periods of increasing production.

• It can lead to overestimation of profits in periods of decreasing production.

• It can lead to underestimation of profits in periods of increasing production.

• It can lead to overestimation of costs in periods of decreasing production.

What is the main difference between absorption costing and variable costing?

• The treatment of variable manufacturing costs

• The treatment of fixed manufacturing overhead

• The treatment of non-manufacturing costs

• The treatment of direct labor costs

Which costing method is likely to show higher profits in a period of increasing inventory levels?

• Absorption costing

• Variable costing

• Both show the same profits

• Neither shows profits

In variable costing, which of the following costs would be included in the calculation of the cost of goods sold?

• Fixed selling expenses

• Variable manufacturing costs

• Fixed administrative expenses

• Variable non-manufacturing costs

How does absorption costing treat non-manufacturing costs?

• Includes them as part of product costs

• Treats them as period costs and expenses them in the period incurred

• Capitalizes them as part of inventory

• Ignores them completely